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Life Insurance Stock Outlook: Near-Term Prospects Bright
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The Zacks Life Insurance industry comprises companies that offer life insurance coverages and well as retirement benefits to individuals and groups. The products include annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements as well as long-term healthcare policies.
The industry also includes companies that provide wealth and asset management solutions.
Let us take a look at the industry’s:
The rising interest rate environment is a boon for the life insurance industry. The Federal Reserve has already made nine rate hikes since December 2015, reflecting improving economic conditions. However, the central bank may not raise rates in 2019 against its earlier expectation of two raises due to slowing economic growth and sluggish inflation. The rate currently stands at 2.50% compared with the near- zero level at the time of the financial crisis. Life insurers invest a big chunk they receive as premiums so that they have enough funds at the time of claims or upon maturity. Since higher interest rates help the industry, absence of a rate hike could weigh on investment income and reinvestment rate.
A strong labor market (with declining unemployment and rising wages) are driving policy sales even at higher premiums. Also, growth in aging population is driving demand for retirement benefit products.
Life insurers have been gradually adopting technology in their daily operations. Carriers have started selling policies online that appeal to the tech savvy population. At the same time, the use of real time data is making premium calculation easier and reducing risk. The increased usage of health and fitness app over a period of time is helping towards the cause. Moreover, adoption of technologies like artificial intelligence (AI), robotic process automation (RPA), cognitive intelligence (CI) or blockchain should help life insurers curb operational costs.
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright prospects in the near term. The Zacks Life Insurance industry, which is a 16-stock group within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #23, which places it in the top 9% of 256 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Year to date, the industry’s earnings estimate for the current year has gone up 0.5%.
Before we present a few life insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 and Sector
The Life Insurance industry has outperformed the Zacks S&P 500 composite as well as its own sector year to date. The stocks in this industry have collectively gained 15.7% year to date while the Finance sector has increased 7.5%. Meanwhile, the Zacks S&P 500 composite has increased 11.8% over the same period.
One-Year Price Performance
Life Insurance Industry’s Current Valuation
On the basis of trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 3.2X compared with the S&P 500’s 3.9X and the sector’s 2.4X.
Over the past five years, the industry has traded as high as 3.4X, as low as 1.3X and at the median of 2.2X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
Bottom Line
Strengthening of the economy and a favorable rate environment should boost the industry’s performance. Trimming underwriting expenses and modestly increasing premium rates should help life insurers improve net income. Also, a beefed-up capital market should solidify the industry’s liquidity profile in the upcoming quarters and aid its participants in confronting confront any unforeseen challenges.
However, the Department of Labor’s Fiduciary Rule, which is expected to take effect on Jul 1, 2019, might make it difficult for life insurers to sell their retirement products.
One of the stocks in the Zacks Life insurance space currently sports a Zacks Rank #1 (Strong Buy) while five others carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Health Insurance Innovations, Inc. : Based in Tampa, FL, this operator of cloud-based technology platform and distributor of individual and family health insurance plans, and supplemental products in the United States sports a Zacks Rank #1. The Zacks Consensus Estimate for current-year earnings has increased 4.9% while the same for 2020 jumped 10.9% over the past 30 days.
Price and Consensus: HIIQ
Reinsurance Group of America, Incorporated (RGA - Free Report) : The company engages in reinsurance business, offering individual and group life and health insurance products. The Zacks Consensus Estimate for this Chesterfield, MO-based company has gone up 0.6% for 2019 and 0.1% for 2020 over the past 30 days.
Price and Consensus: RGA
Voya Financial, Inc. (VOYA - Free Report) : This New York based operator of retirement, investment, and employee benefits in the United States has seen the Zacks Consensus Estimate for 2019 and 2020 move up 0.7% each in the past 30 days.
Price and Consensus: VOYA
Torchmark Corporation : This McKinney, TX based life insurer provides various life and health insurance products, and annuities in the United States, Canada, and New Zealand. The Zacks Consensus Estimate for 2019 and 2020 indicates a respective year-over-year increase of 7.8% and 6.9%. The long-term expected earnings growth rate is currently pegged at 7.5%.
Price and Consensus: TMK
Manulife Financial Corporation (MFC - Free Report) : This Toronto, Canada based company provides financial advice, insurance, and wealth and asset management solutions for individuals, groups, and institutions in Asia, Canada, and the United States. The Zacks Consensus Estimate for 2019 earnings has moved up 0.5% and 2.6% for 2020 over the past 30 days.
Price and Consensus: MFC
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Life Insurance Stock Outlook: Near-Term Prospects Bright
The Zacks Life Insurance industry comprises companies that offer life insurance coverages and well as retirement benefits to individuals and groups. The products include annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements as well as long-term healthcare policies.
The industry also includes companies that provide wealth and asset management solutions.
Let us take a look at the industry’s:
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright prospects in the near term. The Zacks Life Insurance industry, which is a 16-stock group within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #23, which places it in the top 9% of 256 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Year to date, the industry’s earnings estimate for the current year has gone up 0.5%.
Before we present a few life insurance stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 and Sector
The Life Insurance industry has outperformed the Zacks S&P 500 composite as well as its own sector year to date. The stocks in this industry have collectively gained 15.7% year to date while the Finance sector has increased 7.5%. Meanwhile, the Zacks S&P 500 composite has increased 11.8% over the same period.
One-Year Price Performance
Life Insurance Industry’s Current Valuation
On the basis of trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 3.2X compared with the S&P 500’s 3.9X and the sector’s 2.4X.
Over the past five years, the industry has traded as high as 3.4X, as low as 1.3X and at the median of 2.2X.
Price-to-Book (P/B) Ratio (TTM)
Price-to-Book (P/B) Ratio (TTM)
Bottom Line
Strengthening of the economy and a favorable rate environment should boost the industry’s performance. Trimming underwriting expenses and modestly increasing premium rates should help life insurers improve net income. Also, a beefed-up capital market should solidify the industry’s liquidity profile in the upcoming quarters and aid its participants in confronting confront any unforeseen challenges.
However, the Department of Labor’s Fiduciary Rule, which is expected to take effect on Jul 1, 2019, might make it difficult for life insurers to sell their retirement products.
One of the stocks in the Zacks Life insurance space currently sports a Zacks Rank #1 (Strong Buy) while five others carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Health Insurance Innovations, Inc. : Based in Tampa, FL, this operator of cloud-based technology platform and distributor of individual and family health insurance plans, and supplemental products in the United States sports a Zacks Rank #1. The Zacks Consensus Estimate for current-year earnings has increased 4.9% while the same for 2020 jumped 10.9% over the past 30 days.
Price and Consensus: HIIQ
Reinsurance Group of America, Incorporated (RGA - Free Report) : The company engages in reinsurance business, offering individual and group life and health insurance products. The Zacks Consensus Estimate for this Chesterfield, MO-based company has gone up 0.6% for 2019 and 0.1% for 2020 over the past 30 days.
Price and Consensus: RGA
Voya Financial, Inc. (VOYA - Free Report) : This New York based operator of retirement, investment, and employee benefits in the United States has seen the Zacks Consensus Estimate for 2019 and 2020 move up 0.7% each in the past 30 days.
Price and Consensus: VOYA
Torchmark Corporation : This McKinney, TX based life insurer provides various life and health insurance products, and annuities in the United States, Canada, and New Zealand. The Zacks Consensus Estimate for 2019 and 2020 indicates a respective year-over-year increase of 7.8% and 6.9%. The long-term expected earnings growth rate is currently pegged at 7.5%.
Price and Consensus: TMK
Manulife Financial Corporation (MFC - Free Report) : This Toronto, Canada based company provides financial advice, insurance, and wealth and asset management solutions for individuals, groups, and institutions in Asia, Canada, and the United States. The Zacks Consensus Estimate for 2019 earnings has moved up 0.5% and 2.6% for 2020 over the past 30 days.
Price and Consensus: MFC
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>